YED (Income Elasticity of Demand

• YED (Income elasticity of demand)


  Measure of responsiveness of demand to changes in income
• YED can be both


  positive and negative
• Inferior goods have a

  negative YED
• Normal goods have a positive YED
• Normal goods

  goods which demand increases as income increases
• Inferior goods

  goods which demand decrease as income increases
• YED equation


  percentage change in quantity demanded divided by percentage change in income
• YED Inelastic

  -1 to 1
• YED Elastic

  -infinity to -1 and 1 to infinity
• YED of a necessity is

  0 to 1
• Luxury good YED is

  bigger than 1